Suppose the labour force and (physical) capital stock are growing at a rate of 2.5% and 3% respectively, and the labour share of income is 60%. In addition, the total factor productivity is increasing at 0.8%.

Note: All the growth rates are annual rates.

"If the velocity of money is rising at 2% and the central bank wants to obtain a target of inflation at 1.5%, then it should set a monetary growth rate of 5.5%." True/False, explain.

Suppose the growth rate of total factor productivity increases by 50% at time T0, what happens to the price level at time T0? Explain in words.